European Banks Don’t Suck Anymore

Banks are one of the most important groups in the world. They give us top-notch information about the risk appetite of global investors.

And man, this past year, banks outside the US have been absolutely crushing it.

Anytime JC asks me about international stocks, it’s tough not to bring up European Banks. 

I don’t know exactly what’s going on over there, but these names have been ripping across the board all year.

Just look at Deutsche Bank $DB, Banco Bilbao Vizcaya $BBVA, or  HSBC Holdings $HSBC.

They represent different countries, but they all look great

Now, when we compare European Banks $EUFN vs U.S. Banks $KBE, the picture gets even more interesting. 

The ratio has carved out a massive rounding bottom over the past few years.

You can see the accumulation, from left to right, in the chart above.

From 2010 through 2020, U.S. banks outperformed their European peers. But since then, the tide has turned.

Now price is pushing up against the top of that range, threatening to break out and complete a structural trend reversal.

This could be the start of a whole new era of outperformance for European banks.

And if that’s true, think about the implications. 

Financials make up a huge chunk of the major indexes and ETFs across Europe. 

If they’re going to keep leading over longer timeframes, it means European equities have plenty of fuel left in the tank.

To me, it all points to a bullish outlook for Europe.

Alfonso